- Former Bank of Israel Governor Stanley Fischer is President Barack Obama’s leading candidate to become vice chairman of the Federal Reserve, people familiar with the selection process said.
Fischer, 70, would replace Janet Yellen as the Fed’s No. 2 official, according to the people, who asked for anonymity because the decision isn’t final. There are no plans by the White House to announce the choice this week, one of the people said.
Obama has already offered the job to Fischer, who accepted it, according to another person familiar with the process. The person said the decision was made jointly by the president and Yellen, who is awaiting Senate confirmation to succeed Ben S. Bernanke as Fed chairman.
“I would expect Yellen and Fischer to work closely together and form a very potent team,” said Mark Gertler, a New York University economist who has coauthored research with Bernanke. “He has the ideal mix of qualities you would like in a central banker: wise, experienced and cool under pressure. His academic work was thoughtful and mainstream, where I’d expect him to be as a central banker.”
Dual Citizenship
Fischer, who holds both U.S. and Israeli citizenship and now lives in New York, stepped down as governor of the Bank of Israel on June 30, midway through his second five-year term. He was credited with helping his nation weather the global economic crisis better than most developed countries.
As Fed vice chairman, Fischer would take over a post that Yellen turned into a platform for promoting greater transparency at the central bank, including spelling out goals for inflation and unemployment.
Fischer has voiced skepticism about using so-called forward guidance to signal the Fed’s policy intentions as much as two years in advance.
“In general, it is very hard for us to forecast developments at such ranges,” Fischer said in a speech in June to a conference of the Israel Economic Association in Tel Aviv. He said the Fed seems to deliver forecasts on unemployment and interest rates “in an attempt to affect actual events. However, in my opinion, the central bank must tell the truth that comes out of its models and estimations.”
He added: “In any case, the Fed adopted a forward guidance policy and, until now, it has succeeded with it.”
Bernanke Hallmark
Fischer’s stance may raise some questions, said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.
“The market seems to think that he is not in favor of forward guidance based on his prior comments, where forward guidance is the hallmark of the Bernanke Fed,” he said.
As a professor at Massachusetts Institute of Technology, Fischer oversaw Bernanke’s thesis and also taught European Central Bank President Mario Draghi. Fischer credited each with helping to rescue the world economy and said in a June 13 interview with Bloomberg News in London that future students will study their policies.
“I’d like to be able to say all the things they are doing were from what they learned in lectures at MIT, but it wouldn’t be true,” Fischer said then. “From now on when we teach these courses, we’ll teach the lessons we’ve learned from Bernanke and Draghi.”
Former U.S. Treasury Secretary Lawrence Summers and Greg Mankiw, who headed President George W. Bush’s Council of Economic Advisers, also studied under Fischer.
Summers, speaking at an IMF conference in honor of Fischer held last month, said having Fischer as a teacher “was a remarkable intellectual experience.”
No ‘Game’
“Stan never lost sight of the fact that this was not just an intellectual game,” Summers said. “He emphasized that getting these questions right made a profound difference in the lives of nations and their peoples.”
Fischer earned a reputation as a trailblazer as the first central banker to cut interest rates in 2008 at the start of the global economic crisis and the first to raise them the following year in response to signs of a financial recovery.
He also bought up foreign currency in unprecedented amounts to drive down the value of the shekel and boost exports, more than doubling reserves.
‘Quite Decisive’
“At the Bank of Israel he acted very aggressively off the bat when the crisis began to take hold,” said Drew Matus, senior economist at UBS Securities LLC in Stamford, Connecticut, and a former analyst at the New York Fed. “He seems to be quite decisive.”
Among his innovations at the Bank of Israel was the shifting of responsibility for the monthly interest-rate decision from the governor alone to a six-member Monetary Committee, including three outside academics. He employed a Fed-style dual focus on employment and growth alongside price stability, where previous governors placed an emphasis on inflation.
“It is testament to Stan’s skillful handling of Israel’s economy that it is one of the very few advanced economies whose output increased every year through the crisis period,” former Bank of England Governor Mervyn King said June 12.
Fischer’s resume also includes service at the International Monetary Fund and World Bank, and a stint as vice chairman of New York-based Citigroup Inc.
Fischer’s work has focused on “the intersection of international economics, financial crises and macroeconomics,” while Yellen’s has concentrated on “the intersection of labor and macro,” said Jonathan Wright, an economics professor at Johns Hopkins University in Baltimore who worked at the Fed’s division of monetary affairs from 2004 until 2008.
Policy Harmony
“But they would be on the same page as regards policy,” Wright said. “I think it would be the best possible leadership for the Fed.”
Fischer wouldn’t be the first central bank governor to change countries. Bank of England Governor Mark Carney was governor of the Bank of Canada from 2008 until last June.
Fischer spent multiple periods at MIT in Cambridge, Massachusetts, where he earned his Ph.D. in economics in 1969, joining the school’s faculty as an associate professor in 1973 and becoming an endowed professor in the early 1990s.
He was taught by future Nobel laureate economists Paul Samuelson and Robert Solow.
World Bank
From 1988 to 1990, Fischer was chief economist at the Washington-based World Bank. After returning to teaching at MIT, Fischer joined the IMF as deputy to Managing Director Michel Camdessus in 1994, working to resolve financial crises in Mexico, Russia and Southeast Asia. He left the IMF in 2001 and joined Citigroup as a vice chairman.
Born in 1943 in Zambia, then Northern Rhodesia, Fischer was a member of Habonim, a Zionist youth group, along with Rhoda Keet, his future wife. In the early 1960s, he spent six months on a kibbutz on Israel’s Mediterranean coastal plain, where he combined learning Hebrew with manual labor, picking and planting bananas.
In 2005, Fischer accepted Israel’s offer to head its central bank, and became an Israeli citizen, one of the job requirements.
1 comment:
I have long been a big fan of Fischer.
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